Hos­pi­tal con­sol­i­da­tion drives prices for pri­vately in­sured, data sug­gest

Modern Healthcare - - NEWS - By Me­lanie Evans

The lib­er­a­tion of long-hid­den data on what pri­vate in­sur­ers pay for med­i­cal ser­vices may in­creas­ingly put providers in an un­flat­ter­ing light as they bulk up through merg­ers and ac­qui­si­tions.

Health pol­icy re­searchers have gen­er­ally turned to Medi­care to study vari­a­tions on health­care spend­ing in the ab­sence of price data from pri­vate in­sur­ers, and their con­clu­sions fo­cused on the vol­ume and in­ten­sity of ser­vices ren­dered.

But com­mer­cial health plans that cover work­place ben­e­fits for mil­lions of Amer­i­cans pay higher prices to hos­pi­tals that have lit­tle or no com­pe­ti­tion, ac­cord­ing to a study that raises ques­tions about how to slow U.S. health spend­ing amid a wave of con­sol­i­da­tion.

In a study pub­lished by the Na­tional Bureau of Eco­nomic Re­search, re­searchers an­a­lyzed health spend­ing across mul­ti­ple U.S. mar­kets and com­pared the num­bers for Medi­care with claims data for 88 mil­lion pa­tients with em­ployer-spon­sored health in­sur­ance.

Pri­vate in­sur­ance prices were 15% higher when hos­pi­tals had no com­pe­ti­tion com­pared with mar­kets with at least four hos­pi­tals. That amounts to a dif­fer­ence of about $2,000 per ad­mis­sion, said Martin Gaynor, one of the re­searchers and for­mer di­rec­tor of the Fed­eral Trade Com­mis­sion’s Bureau of Eco­nomics.

“Prices have a lot to do with spend­ing, and a lot of what’s driv­ing price is the dif­fer­ence in the com­pet­i­tive mar­ket,” Gaynor said.

The find­ings are sig­nif­i­cant as hos­pi­tals across the coun­try con­tinue a deal binge that has con­sol­i­dated mar­kets and cre­ated re­gional gi­ants.

Lead­ers of the merg­ing hos­pi­tals and sys­tems rou­tinely say the strat­egy is nec­es­sary to meet changes in fed­eral pol­icy that cre­ate a fi­nan­cial in­cen­tive for hos­pi­tals to con­trol more of the mar­ket. State and fed­eral an­titrust en­forcers have ar­gued oth­er­wise. The Fed­eral Trade Com­mis­sion has moved to block three hos­pi­tal deals in the past two months, in­clud­ing a chal­lenge an­nounced Fri­day seek­ing to de­rail the merger of Ad­vo­cate Health Care and NorthShore Univer­sity Health Sys­tem in Illi­nois.

But the “horse may be out of the barn” in mar­kets that are al­ready con­cen­trated, said Thomas Gre­aney, a law pro­fes­sor at St. Louis Univer­sity. “An­titrust law has no rem­edy for high prices” af­ter deals tran­spire.

Prices were also higher even with some com­pe­ti­tion among providers. Mar­kets with two hos­pi­tals had prices roughly 6% higher than those with four or more hos­pi­tals. Three-hos­pi­tal towns had prices about 5% higher than those with at least four hos­pi­tals vy­ing for busi­ness.

The study also found that spend­ing for pri­vate pa­tients of­ten di­verged from Medi­care spend­ing.

Hos­pi­tals can­not ne­go­ti­ate with Medi­care to raise prices, and re­searchers found that how much care pa­tients get de­ter­mines how spend­ing varies across mar­kets. That re­sult is not news. Medi­care spend­ing has been closely stud­ied for years for clues to the na­tion’s ab­nor­mally high med­i­cal costs when com­pared with other na­tions.

Pri­vate health spend­ing has been much harder to study and only in re­cent years have reg­u­la­tors and the busi­ness com­mu­nity forced more dis­clo­sure. For the new study, re­searchers used claims data pro­vided by Aetna, Hu­mana and Unit­edHealth­care to a not-for-profit health spend­ing re­search cen­ter called the Health Care Cost In­sti­tute.

For em­ploy­ers and house­holds, higher prices in less com­pet­i­tive mar­kets amount to higher pre­mi­ums or big­ger bills un­der high-de­ductible health plans. “That’s a sub­stan­tial amount of money,” Gaynor said. “De­pend­ing on where you live, that’s a couple of mort­gage pay­ments. For many peo­ple, that amount of money would wipe out their sav­ings in one fell swoop.”

Cities with higher pre­mi­ums on the ACA’s in­sur­ance ex­changes ap­pear to be cities with high price hos­pi­tals, said Cyn­thia Cox, as­so­ciate di­rec­tor of health re­form and pri­vate in­sur­ance at the Kaiser Fam­ily Foun­da­tion.

For pol­i­cy­mak­ers, that sug­gests more ef­fort is needed at the state and fed­eral level to pro­mote more com­peti­tors in each mar­ket and more tools for con­sumers to choose among com­peti­tors.

“If you look at why health­care spend­ing is such a prob­lem in Amer­ica, it is pri­mar­ily driven by price,” said Dr. Ashish Jha, a pro­fes­sor at the Har­vard T.H. Chan School of Pub­lic Health.

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